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Diab Says Eurobond Decision by Weekend, Salameh Reassures on Gold

Mar 03

Diab Says Eurobond Decision by Weekend, Salameh Reassures on Gold

Prime Minister Hassan Diab announced Monday that Lebanon’s final decision on whether or not to pay a $1.2 billion Eurobond debt that matures on March 9 will be taken Friday or Saturday.

“The decision will preserve the rights of small and medium depositors as well as Lebanon’s interest,” Diab added after a high-level financial meeting at the Grand Serail.

Central Bank Governor Riad Salameh meanwhile stressed that “using the gold reserve is out of the question.”

“I have no say in the Eurobond issue and the decision is to be taken by the government,” he added.

In addition to Diab and Salameh, the Grand Serail meeting was attended by the ministers of finance, industry, economy and public works and the head of the banks association.

Lebanon is currently facing its worst economic crisis since its 1975-1990 civil war. The value of the Lebanese pound has plummeted on the black market, prices have risen, and many businesses have been forced to slash salaries, dismiss staff or close.

Lebanon is one of the most indebted countries in the world, with a public debt equivalent to 150 percent of its GDP. The country is now under pressure to pay a $1.2 billion Eurobond maturity on March 9.

Economists warn payment on time would eat away at plummeting foreign currency reserves, while bankers say a default would damage Lebanon's reputation with lenders.

Bank of America Merill Lynch in a November report estimated that around 50 percent of Eurobonds were held by local banks, while the central bank had around 11 percent.

Foreign investors owned the remainder, or around 39 percent, it said.

But these figures may have changed, with local media reporting that local banks have recently sold a chunk of their Eurobonds to foreign lenders.